Excursion 23

Why not start with narrative?

Question: “Why doesn’t business model analysis start with narrative? Why not build resources, transactions, and value around the narrative?”

Answer: Many entrepreneurs do start with the narrative. We addressed it last for two reasons. First, we suspect many readers already run an organization, so generating a new "story" from scratch would be difficult or awkward. Second, good stories do not guarantee good business models.

There are two reasons we worked through the dimensions of brilliant business models before discussing narrative. First, we expected that many readers would already have an operating organization. If you have a working business, then analyzing the resources, transactions, and value creation elements is a better starting point than trying to come up with an entirely new story. Because stories make intuitive sense, it is usually quite difficult to generate an alternate story from the same set of elements. Extensive research has shown that people do not really evaluate multiple options simultaneously. Instead, we make comparisons between two options, reject the less convincing one, and then try another comparison. (8.2) So any new narrative would be compared against the current story, which is clearly anchored in the existing business. Trying to come up with a convincing alternative story given the current set of elements and activities is very, very unlikely. If you change some of the elements, however, then the comparison process is less likely to reject alternatives out of hand.

Second, common sense can simply be too common. A brilliant business model must have a coherent narrative, but not all good stories make good business models. If you are exploring an opportunity from scratch, your assessment of its viability is likely to be based on your emotional enthusiasm or the ease of communicating the idea. “Uber for college tutoring” is a great story, but not a viable business model. This is one of the major potential pitfalls of business model narrative. The characteristics that make a business model easy to communicate are not necessarily tied to its viability.